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Regs. Specifically, respondent suggests that JKP’s sale of the
club’s operation within 3 months of its acquisition “creates a
strong inference” that the sale occurred as part of an overall
plan commencing with the transfer of the operation from 2618 to
JKP and ending with the sale to outsiders. See sec. 1.368-
1(d)(5), Example 5, Income Tax Regs. Alternatively, respondent
argues that, even if we decide that the transfer of the club’s
operation from 2618 to JKP qualified as either a “D” or “F”
reorganization, petitioner must be deemed to be in receipt of the
$40,011 total assets listed on the yearend balance sheet in
Schedule L of 2618's 1989 return (the 1989 return balance sheet).
Therefore, he is required to recognize that amount of long-term
capital gain pursuant to section 356(a)(1)(B) and (2).
B. Status of JKP’s Acquisition of the Club as a “D”
Reorganization
1. Statutory Requirements
We find that the club was, in fact, owned and operated by
2618, not, as respondent suggests, by petitioner. The parties
have stipulated that 2618 “is a corporation that owned and
operated a topless dance club under the name of Caligula XXI”.
They have further stipulated that petitioner’s management
services and involvement in the operation of the club were
pursuant to the March 16, 1987, agreement, which gave petitioner
the right to “control and manage” the club’s activities in
consideration of “a management fee for said service.” That
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